VC Slowdown Puts Deadly Pressure on Startups
Plus, Robinhood's surprising quarter.
Number of the Week: $25 million (explanation below)
VC Slowdown Puts Deadly Pressure on Startups
If the first half of 2023 is any indication, the venture capital business is headed for a funding dry spell that could drag on for the next 18 months and potentially trigger a tsunami of startup failures. A “Darwinian moment” is how Jennifer Neundorfer, general partner at January Ventures, referred to the current funding environment for startups in a recent Insider story.
Startups raised $144 billion in the first six months of the year, a 51% decline from the $293 billion invested in the same period a year earlier, according to Crunchbase—and that’s despite feverish investment in artificial intelligence (AI) startups that comprised 18% of total global venture funding thus far this year. Crunchbase data also reveals that the seven most active global venture investors collectively led 80 rounds during 2023’s first half, a 78% decline from the 364 rounds during the same period a year earlier. Crypto funding plunged by 75% in the first half to $3.7 billion—less than a quarter of the investment made in the same period in 2022 (though Blockstream, LayerZero and Ledger all had $100 million-plus funding rounds this year).
It's one more data point in our economy of contradictions. FirstMark Capital partner Matt Turck sums up the current state of the market this way: “Feels like a recession but the stock market is ripping with full employment; also venture is dead, but every deal I look at is expensive/competitive; also crypto is done for but Bitcoin is up 65% YTD; also the economy is bad but ad revenues crushing it.”
On the fintech front, global funding dropped by 49% year over year, to $23 billion in the first half of 2023, though fintech funding values have been ascending in the first two quarters of 2023, versus the third and fourth quarters of 2022, according to analysis of S&P Global Market Intelligence data. The caveat is that “a handful of billion-dollar rounds have propped up funding values” this year, including Stripe's $6.5 billion round, notes S&P Global research author Sampath Sharma Nariyanuri (Stripe’s valuation was halved to $50 billion).